 Why income comparison is rationalDavid H. Wolpert Games and Economic Behavior, 2010, vol. 69, issue 2, 458-474 Abstract: A major factor affecting a person's happiness is the gap between their income and their neighbors', independent of their own income. This effect is strongest when the neighbor has moderately higher income. In addition a person's lifetime happiness often follows a "U" shape. Previous models have explained subsets of these phenomena, typically assuming the person has limited ability to assess their own (hedonic) utility. Here I present a model that explains all the phenomena, without such assumptions. In this model greater income of your neighbor is statistical data that, if carefully analyzed, would recommend that you explore for a new income-generating strategy. This explains unhappiness that your neighbor has greater income, as an emotional "prod" that induces you to explore, in accord with careful statistical analysis. It explains the "U" shape of happiness similarly. Another benefit of this model is that it makes many falsifiable predictions. Keywords: Social; comparison; Hedonic; utility; Easterlin; paradox; U-shaped; lifetime; curve; Keep; up; with; the; Joneses; Herding; Income; comparison; Search; algorithm; Decision; theory (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:69:y:2010:i:2:p:458-474 Access Statistics for this article Games and Economic Behavior is currently edited by E. Kalai More articles in Games and Economic Behavior from Elsevier |
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